[quote="Fanblade"][quote="Realitychex"]
Very well.
2015
AC Revenues: $13.87b
Expenses: $12.37b
Interest Expense: $402m interest
+$105m Net Financing Expense relating to Employee Benefits
Operating Earnings: $989m
Margin: 7.13%
BELF: 76.9%
CASM: 15.8 cents
ASL: 1,545 miles (Stage length increases 3.2%, casm decreases, yield per mile decreases).
WJ Revenues: $4.03b
Expenses: $3.46b
Interest Expense: $53.7m
Operating Earnings: $516m
Margin: 12.8%
BELF: 69.8%
CASM: 13.1 cents
ASL: 910 miles (Stage length decreases 2.7%, casm increases, yield per mile increases).
For the record, the industry produced a margin of 10.6% with a BELF of 74.7%.
For Canadian-based airlines, it's pretty obvious from 4Q numbers that 2015 was, more than likely, the high water mark. There's a lot of ugliness out there.
WestJet and AC are both exposed to the domestic malaise. WJ has very limited exposure to US trans-border business traffic malaise, and will add to the suffering when Boston is added next month and those $1.70 a mile yields drop to about 75 cents, just as they did after WJ launched LGA a few years ago. Sun traffic, surprisingly, seems to be holding its own for both carriers, but at the expense of yield. That's where having much lower costs is the savior.
WJ has no exposure to the various segments of international malaise that has gone unreported. Outta sight, outta mind.
Asia yields are very, very low. Brazil is in rough shape. A pitched battle is being fought on Edmonton to Europe, which could easily spread beyond Edmonton and the transatlantic jewel in the crown will lose a lot of it's luster for the incumbents starting in a couple of months.
I doubt there would be many who'd suggest that, at least for Canadian domiciled airlines, 2016 results will supercede 2015 numbers. When the elephant gets the flu, it impacts everyone in the jungle.
However, when things start to slip-slide away, it's better to start from a cushion of almost 13% margins than with 7% margins.
If WJA margins fall 10% points from 13%, the company can continue status quo in perpetuity with 3% margins. Not great, but no danger of failure.
Should the malaise result in AC margins falling by 10% pts from 7% resulting in -3% margins, an operating loss approaching $400 million a year occurs, well over a million dollars a day. That sort of scenario has always resulted in some pretty significant alterations to the program.
Neither are happy scenarios. One would hope the weakness will not result in margins dropping anywhere near 10% points.
But that being said, I'm pretty sure I know who's boots I'd prefer to be wearing right now as the various execs look through the murk in search of the bottom.